Amid rising concerns over sugar, pressure continues to mount on soft drink manufacturers to develop exciting, yet healthy, drinks to reignite the category and re-engage with consumers. Globally, these pressures, together with general boredom of traditional beverage options, is driving consumers away from sugary carbonates and juice drinks, towards healthier forms of hydration such as bottled water and functional drinks.
Asia Pacific, the largest soft drinks market globally, is no exception to the healthy hydration trend; with energy drinks, packaged water and flavoured water representing the fastest growing soft drinks categories.
Indeed the soft drinks market in Asia Pacific was worth US$267 billion in 2015 according to figures from GlobalData. This is forecast to grow a further 7.2 percent per year to reach almost US$374 billion by 2020. Soft drink brands can seize the opportunity to capitalise on this lucrative market, provided innovation is effectively tailored to the needs of consumers.
Innovation Opportunities Exist
Fig.1: Top 5 factors consumers claim always influence their soft drink choices in Asia Pacific.
New research published by GlobalData has identified several key trends and opportunities in soft drinks innovation to help manufacturers overcome key obstacles and grow their brands in a challenging marketplace.
Healthy, ‘clean’ and functional soft drinks are in demand, with 92 percent of consumers in the Asia Pacific region finding general health and wellbeing claims appealing in food and drink products according to the company’s Q4 2015 consumer survey. These consumers are seeking convenient ways to improve their personal wellbeing and live a more holistic lifestyle, without cutting soft drinks completely out of their diet.
In this way, manufacturers must reduce sugar and calorie content and use natural sugar alternatives, such as stevia or monk fruit sweeteners, to appeal to today’s more health-driven consumer.
Importantly, in the pursuit of healthier innovation, brands must not neglect the fact that soft drink purchases are also strongly influenced by other key factors: brand familiarity, price and sensory aspects (i.e. how enjoyable the product is).
While health is very important—28 percent of consumers in Asia Pacific claim health and wellness impact always influences their soft drink choices (see Figure 1)—consumers do not want to compromise on their favourite brands, or flavours they enjoy. The challenge for trusted brands is to align with current health needs without compromising on product enjoyment.
Focus On “Good For You” As Well As “Better For You”
Fig. 2: Karma Probiotic Wellness Water
While the sugar backlash, concerns around artificial ingredients, and a desire for a ’cleaner’ lifestyle are driving demand for beverages that are deemed “better for you” than regular soft drinks, many consumers are also looking for products that are actively “good for you.”
Consequently, in addition to reducing sugar content, brands should consider offering added functional benefits to appeal to consumers seeking products that actively improve specific aspects of their health.
Digestive health is one such benefit that can turn a soft drink from “better for you” to “good for you” and offers a key opportunity for growth, both globally and in the Asia Pacific region.
According to primary research from the company’s Q4 2015 survey, 87 percent of consumers in the Asia Pacific region are interested in functional food and drinks that claim to improve digestive health; yet only half of these are actively buying such products. This highlights an opportunity to offer a greater choice of soft drinks that align with this need, and turn consumer interest into active purchases.
A brand which has successfully tapped into this trend is Karma Probiotics Wellness Water from the US (see Figure 2), which claims to contain a patented ingredient providing up to 10 times more digestive health-promoting live cultures than probiotic yoghurt. The inclusion of digestive health benefits in a bottled water product addresses demand for functional digestive health benefits, within a fast growing beverage segment (bottled water) that will appeal to health-driven consumers.
Beyond Healthy Hydration
Fig.3: Pepsi's Stubborn Soda Range
Healthy hydration is clearly an overriding theme impacting consumer demand and innovation across the soft drinks space. However more specific, but related, innovation trends are emerging from this such as adultifying soft drinks, and the use of savoury and subtle flavours to overcome the need for sugar.
As health-conscious consumers continue to gravitate towards "better-for-you" choices, alcohol-free soft drinks have generated strong interest among drinkers as they seek to cut down on their alcohol consumption. According to the Q4 2016 consumer survey, 27 percent of drinkers in the Asia Pacific region are actively trying to reduce their consumption of alcohol; the global average stands at 22 percent.
"Adult" soft drinks therefore offer a strong growth opportunity for manufacturers in the region; this represents a premium, attractive alternative to alcohol both for everyday consumption and special occasions. Innovations emerging in this sector feature packaging or flavour profiles that mimic alcoholic drinks to enhance the consumer experience and also target traditional alcohol consumption occasions.
Pepsi’s craft Stubborn Soda range in the US for example (see Figure 3) capitalises on this trend, featuring five "bold and unexpected flavour combinations" such as agave, vanilla, and cream soda, and black cherry with tarragon. The glass packaging, sophisticated flavours, and use of quality ingredients (e.g. real sugar and stevia are used as sweeteners) give the soft drink a premium feel.
Unsweet Innovation Addresses Sugar Concerns
Fig.4: Hint Caffeine Kick
Linked to soft drink “adultification,” as well as wider the wider healthy hydration trend, is the growing appeal of unsweet, savoury and subtle soft drink flavours. According to the Q4 2016 consumer survey, the majority of consumers (62 percent in Asia Pacific) believe unsweetened products are healthier for them, yet taste remains a potential barrier to consumption.
The use of unique savoury ingredients (e.g. spices), and subtle flavour hints (e.g. fruit and herbal extracts), can help overcome this barrier, while keeping sugar content low.
The challenge for brands is to create products that offer subtle unsweetened flavours in a way that will excite consumers, particularly younger adults who, while health conscious, are most sceptical about the taste of unsweetened products.
Hint Water in the US has managed to achieve this through innovative and functional flavour infusions. The newest addition to their line-up for example, includes Hint Caffeine Kick (see Figure 4), which combines unique subtle flavours such as lemon cayenne, with natural caffeine to offer a functional energizing boost.
The combination of added functionality, with a healthy and unique flavour profile will appeal to consumers looking for something not only better for them (i.e. low in sugar) but also good for them (i.e. energising).
Combine Enjoyment With Health To Succeed
It is clear that soft drinks brands must align with demand for healthier hydration to grow in a challenging marketplace. However the overriding test is to develop innovation that not is not only “cleaner” and lower in sugar, but also offers enticing sensory or functional advantages to drive trial and consumption.
Adult soft drinks offer a key route to premiumisation and hold strong potential in driving value growth as adults look for healthy, sophisticated, and exciting alternatives to alcohol.